Exercise 5-10A Lower-of-cost-or-market rule: perpetual system LO 5-2

The following information pertains to Hagen Metal Works ending inventory for the current year:

				Unit				Unit
Item	Quantity			Cost				Market Value
C		200			$	13			$	12
D		190				15				12
K		58				11				13
M		44				8				12

Required a. Determine the value of the ending inventory using the lower-of-cost-or-market rule applied to (1) each individual inventory item and (2) the inventory in aggregate.

b. Prepare any necessary journal entries, assuming the decline in value is immaterial, using the (1) individual method and (2) aggregate method. Hagen Metal Works uses the perpetual inventory system. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

• Record entry for cost of goods sold using individual item method.

Note: Enter debits before credits.

Event	General Journal	Debit	Credit
1

• Record entry for cost of goods sold using aggregate method.

• Note: Enter debits before credits.

  Event	General Journal	Debit	Credit
  2